Alcohol abuse has important implications for the productivity of the U.S. workforce. The lost earnings of workers suffering from alcohol problems were estimated at $36.6 billion in 1990 (Rice 1993). Alcohol abuse may cause further productivity losses by interfering with workers' schooling and post-schooling human capital investments. The first objective of the project is to document empirically the relationships between alcohol abuse and post-schooling human capital investment, including effects on wage growth, occupational choice, on-the-job training, job tenure, and experience. In doing so, the project will extend previous research on the productivity effects of alcohol to include fringe benefits and other nonwage job attributes as part of total employee compensation. The study of these relationships in a structural and systematic fashion has been absent. The primary data source is the National Longitudinal Survey of Youth (NLSY), which provides rich panel microdata on young adults' drinking and labor market outcomes. The project will examine the labor market consequences of drinking over almost the entire life cycle through additional analyses of more limited data on alcohol consumption for the original cohorts of the National Longitudinal Surveys (NLS). The second objective is to develop and test a structural framework, based on a theoretical analysis, that generalizes the rational addiction model by considering the labor market as an integrated part of the dynamic environment. Our proposed extension provides new tests of the controversial rational addiction hypothesis. The third objective is to help evaluate more systematically and more accurately the potential effects and interactions among alcohol, education, and income and health policies. The empirical work will be complemented with a calibration and policy simulation exercise, which will simulate the responses of alcohol consumption, wages, and human capital investment to changes in alcohol taxes, health insurance policy, education subsidies, and wage taxes.